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There are a variety of signs that can tip you off as to whether you’re working with a good accountant or not. If your accountant openly discusses other clients with you, offers to lie or sign documents on your behalf, and doesn’t provide straightforward answers, these are signs you are not working with a good accountant.
If you’re in the market for small business accounting help, you probably want to know what you can do to find the best accountant for your business’s needs. But an equally important question is how to avoid hiring a bad accountant.
According to the U.S. Bureau of Labor Statistics, 1,332,700 people in the U.S. call themselves accountants, and according to the AICPA (American Institute of Certified Public Accountants), about 660,000 of those accountants are certified public accountants (CPA).
With so many accountants out there, how do you know that you’re working with one you can trust, if you do need to hire one?
According to the AICPA, disciplinary actions were taken against 80 CPAs in 2018, and 25 CPAs have already been reprimanded in 2019. Over 3,000 tax practitioners are listed as having received sanctions by the IRS in the past 25 years, according the IRS.gov website. We also hear horror stories in the news about individuals and organizations that have been financially ruined because the accountant they trusted mismanaged their funds or used them for personal gain.
All of which is to say you need to tread carefully when looking to hire an accountant for your small business. But what exactly should you look out for? Well, let’s take a closer look at how to know if your accountant is good, or if they could cause problems for you and your business.
There are signs you can look out for when working with your accountant to help you recognize if there could be an issue. If you notice any of the following, you should rethink your relationship with that accountant immediately.
The first sign that you shouldn’t trust your accountant is if they openly discuss another client’s business. Licensed accounting professionals such as CPAs, enrolled agents, tax attorneys, and certified bookkeepers are bound by a code of professional ethics that requires them to safeguard their clients’ identity and sensitive financial information from others.
While it’s perfectly acceptable for your accountant to relate a situation that you may be experiencing back to another client’s experience, they should never reveal the client’s name or provide details that could compromise the client’s identity.
Pay attention to how your accountant handles documents in their office. Are tax returns sitting in full view of visitors to the office? Are computer screens angled away from the view of passersby, or do they have privacy screens?
These types of details are important indicators to how an accountant does their daily work and how seriously they take their client’s confidentiality. If you can view another client’s bank statements or tax returns because they are left in full view, rest assured that others will have the opportunity to view yours.
Nobody likes to pay more on their tax return than they should, but a reputable and trustworthy accountant would never offer to fudge numbers on your returns or any other financial documents. If your accountant is willing to lie to the IRS or a financial institution on your behalf, not only are they breaking the law and breaching their code of professional ethics, but they are putting you at risk and should not be trusted. Further, if they are willing to lie on your behalf to others, you can bet they’d be willing to lie to you.
A trustworthy accountant knows how to maximize your deductions lawfully without falsifying your return and can advise you on how to better manage your finances in order to receive funding. The important thing to remember is that you’re ultimately legally responsible for the information that your accountant submits on your behalf.
You’ve hired your accountant because you expect them to provide advice and expertise to help you run your business. Your accountant should make every effort to answer your questions and thoroughly explain the reports and documents they are preparing. If your accountant pretends to know everything but can’t give you a straight answer, that could indicate they’re inadequately skilled in that area. A trustworthy accountant lets you know upfront what they do and don’t know and never tries to hide the scope of their knowledge.
Make sure that you thoroughly review any forms, documents, or reports with your accountant to make sure you fully understand what is being reported and what the numbers mean. If your accountant is dismissive or makes comments like “You don’t need to worry about that” without offering any reasoning behind the comment, that should raise an eyebrow. Ask them to explain it before you sign anything.
Your accountant should also return your phone calls and follow up with your questions in a timely manner. If you find yourself repeatedly asking the same questions without resolution, you should consider whether your accountant is qualified or has your best interests at heart.
A common mistake that small business owners make is assigning total control to the accountant and not reviewing reports and statements. If your accountant pressures you into making them a signer on your bank or other accounts, or offers to sign tax returns or other binding contracts on your behalf, you should be wary of trusting them. Another warning sign to look for is if your accountant asks you to sign a blank form or check or doesn’t ask you to review the documents you are signing.
The accountant/client relationship should be built on a high level of trust. If you have the feeling that something isn’t right, follow your instincts and ask lots of questions. Make sure that you review and understand any payments or reports that are prepared and submitted by your accountant. A trustworthy accountant has your best interests at heart and does everything possible to make sure you feel confident in their abilities and the security of your personal and financial data.
Now that we know what to look out for in a bad accountant, let’s consider some factors that may indicate you are working with a good accountant. If your accountant qualifies for some or all of the following, chances are you’re in good hands.
The best way to go about finding a business accountant is by tapping into your network. Talk to business advisors, lawyers, your baker, consult reliable accounting blogs or fellow small business owners who you might know. You can also get referrals by attending small business events hosted by your local Chamber of Commerce or Small Business Development Center.
Regardless of how you are referred to your business accountant, the fact that you were referred is a good sign. People don’t simply recommend products or services that they themselves don’t trust. That’s what makes word of mouth advertising so powerful. So if you found your business accountant through a referral from someone you trust, chances are they are good at what they do.
Being a certified public accountant doesn’t automatically make you a good accountant, but a CPA is the only form of licensed accounting qualification in the United States. To become a CPA you must have a bachelor’s degree and pass an exam. Generally, CPAs are well-trained and have more experience than other types of tax practitioners. They also need to renew their certification periodically, guaranteeing they are up to date on the tax code and can handle any new responsibility.
You can find a CPA via the AIPCA website, but we’d recommend seeking a referral first.
Relevant experience counts for a lot when it comes to hiring a small business accountant. You should work with someone who understands the complications of managing a small business and has experience working with businesses structured like yours (LLC, partnership, S-corp etc.). They should also also offer client references who you can contact to learn more about your accountant’s work history and capabilities.
The true mark of a great accountant is how much they will rise above the call of duty. Some accountants will simply manage your accounts and file your tax returns. But the best accountants will suggest new ways to save your business money. They will experiment with different tax maneuvers or new virtual bookkeeping options. They will warn you of any mistakes you are making. If your accountant is doing any of these things, chances are they care about you and your business, and they are worth keeping around.
When you sign on to work with an accountant or an accounting firm, they should clearly explain to you who you’ll be working with, the best method of communication, how they bill for their services, and how often you can expect to hear from them. Setting these expectations early on will make for a more productive working relationship.
There are several resources you can use to check whether your accountant has any complaints or has been reprimanded by the AICPA or the IRS. Every quarter, the AICPA publishes a list of CPAs who have had disciplinary action taken against them. You can also search the IRS database of practitioners who have received disciplinary action over the past 25 years.
We hope this list of what to look for (and what not to look for) in your accountant has been helpful. If there is one more piece of advice we’d offer, it’s this: Trust your gut. If your accountant gives you a bad vibe, or if they don’t seem trustworthy, you should feel comfortable moving on from them. After all, it’s your business, and you need to do what’s in its best interest.